Correlation Between Bats Series and Fixed Income

Can any of the company-specific risk be diversified away by investing in both Bats Series and Fixed Income at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bats Series and Fixed Income into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bats Series M and Fixed Income Shares, you can compare the effects of market volatilities on Bats Series and Fixed Income and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bats Series with a short position of Fixed Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bats Series and Fixed Income.

Diversification Opportunities for Bats Series and Fixed Income

0.98

Correlation Coefficient

Bats Series  Fixed Income

Almost no diversification

The 3 months correlation between Bats and Fixed is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Bats Series M and Fixed Income Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fixed Income Shares and Bats Series is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bats Series M are associated (or correlated) with Fixed Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fixed Income Shares has no effect on the direction of Bats Series i.e., Bats Series and Fixed Income go up and down completely randomly.

Pair Corralation between Bats Series and Fixed Income

Assuming the 90 days horizon Bats Series M is expected to under-perform the Fixed Income. But the mutual fund apears to be less risky and, when comparing its historical volatility, Bats Series M is 1.03 times less risky than Fixed Income. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Fixed Income Shares is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  906.00  in Fixed Income Shares on August 31, 2024 and sell it today you would lose (4.00) from holding Fixed Income Shares or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Bats Series M  vs.  Fixed Income Shares

Bats Series M

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bats Series M has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Bats Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fixed Income Shares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fixed Income Shares has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Fixed Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bats Series and Fixed Income

The main advantage of trading using opposite Bats Series and Fixed Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bats Series position performs unexpectedly, Fixed Income can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fixed Income will offset losses from the drop in Fixed Income's long position.

The idea behind Bats Series M and Fixed Income Shares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Managers module to screen money managers from public funds and ETFs managed around the world.